WEDNESDAY 6/4/14; PMI Services; ADP; ISM Non-Mfg; Beige Book; Eve Before ECB Announcement

The Aussie GDP is +3.5% beating the +3.3% expectation and the highest reading in almost two years. Aussie dollar 0.9263. The SPASX200 loses -0.6%. Aussie banks dump -1%. Copper is weak for the second day. The dollar/yen moves higher to 102.79 so the weaker yen creates gains in Japanese stocks. The NIKK is up +0.2% continuing an upside push above 15K. The SSEC and HSI are both down -0.6%. Global automakers are strong after robust sales numbers yesterday. South Korean markets are closed for elections.

Bitcoin continues on a breakout path running up towards 660. In two weeks, bitcoin has recovered from under 460 gaining over +40%. The re-embrace of bitcoin for Apple apps has provided strong street cred for bitcoin again.

Today is the 25-year anniversary of the Tinanmen Square uprising in Beijing, China, on 6/4/89. That brave young man standing in front of the tank creates the epic symbolic image of the pro-democracy movement. Sadly, that young man has disappeared and likely either has a bullet in his head or is rotting away in prison. The government quickly squashed the movement on 6/4/89 by declaring martial law and systematically killing a thousand or more protestors. Things have changed dramatically for China’s economy but not politically since the Chinese government muzzles any news reports concerning the uprising. Police and government troops create a strong presence at Tinanmen Square today and are prohibiting journalists from reporting from the square.

Euro is weakening today down to 1.3607 threatening a 1.35 handle again. The 200-day MA is 1.3636 and the euro came up to test this resistance yesterday resulting in a spank down. Draghi’s big announcement is now only about 28 hours away. European indexes begin the day red across the board. Italy’s and France’s growth numbers remain very weak.

The ECB signals that the rate cut tomorrow will not be the last one but there is only a tiny bit of space remaining to zero (the benchmark rate is 0.25 and deposit rate is zero). A cut of 10 or 15 basis points in the benchmark rate tomorrow and another 10 to 15 cut next month or later would bring rates to zero. The deposit rate will turn negative tomorrow with the initial rate cut. Global equities may idle sideways until Draghi brings the tablets down from on high to announce how world markets should trade tomorrow morning. The central bankers are the market.

Tesco sales drop with an executive saying the numbers are the worst he has seen in 40 years. Prices are being slashed which will aid consumers short term. Tesco gains +1.1% since even worse news was anticipated but price leaks lower and turns negative as the session continues. Retailer Dufry jumps +5.8% higher. Volkswagen drops -1.7% after a share sale announcement (dilution) to raise funds for the Scania takeover. Fiat loses -0.5% on weak sales.

[Text is Redacted: Purchase June 2014-06 to Read the Complete Chronology]

At 2 PM, the Beige Book shows moderate growth continuing in all 12 Fed districts. The Fed paints an optimistic picture. Two-thirds of the districts see loan demand increasing. Home prices continue rising. The Fed says a shortage of skilled workers remains and wages remain subdued. Wages are key since inflation will not occur without wage growth. Equities top out for the day and sell off into a bottom at 3 PM then recover into the closing bell.

The session ends positively as markets idle sideways ahead of the ECB decision in the morning. The SPX gains 4 points, +0.2%, printing a new all-time intraday high at 1928.63 and new all-time closing high at 1927.88. The INDU gains 15 points, +0.1%, to 16738. The COMPQ is up 18 points, +0.4%, to 4252. The RUT gains 5 points, +0.5%, to 1131, two points shy of the 50-day MA at 1133. The VIX ends above 12 at 12.08. Both equities and volatility is up so one of them is wrong. Markets are trading choppy sideways waiting on the ECB decision.

Fed Chair Yellen will attend the Jackson Hole, Wyoming, August meeting as is typically expected by the Fed head and members. Jackson Hole is a symposium of world central bankers meeting to discuss policy and ideas in a relaxed rural atmosphere. Yellen wil have to visit DKS and CAB to purchase a fishing rod.

Jim O’Neill, formerly of GS and a candidate for the BOE head job a couple years ago, credited for inventing the acronym BRIC (Brazil, Russia, India, China), says India is in a longer term bull market. 63% of young American adults between 18 and 34 years old say the American dream is unattainable.